Why Midstates Petroleum (MPO) Is Popping on Wednesday

NEW YORK (TheStreet) -- Midstates Petroleum (MPO) is popping after management hinted at its improved financial position.

By noon, shares had added 11.2% to $5.06.

In a statement, the company announced it has rescheduled its fourth-quarter earnings to after the bell Tuesday, March 11 from March 4, with a conference call the following day. It said it has delayed the release due to "positive developments around improved financial flexibility."

The Houston-based oiler said it is pursuing a number of options to streamline its portfolio, including sales of assets, joint ventures, and other possible farm-out arrangements.

The company is also seeking to modify its debt structure and is being advised by its bank to facilitate such actions.

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TheStreet Ratings team rates MIDSTATES PETROLEUM CO INC as a Sell with a ratings score of D. The team has this to say about their recommendation:

"We rate MIDSTATES PETROLEUM CO INC (MPO) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, generally disappointing historical performance in the stock itself and unimpressive growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The debt-to-equity ratio is very high at 2.45 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, MPO has a quick ratio of 0.55, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 40.82%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 48.14% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • The change in net income from the same quarter one year ago has exceeded that of the Oil, Gas & Consumable Fuels industry average, but is less than that of the S&P 500. The net income has significantly decreased by 32.6% when compared to the same quarter one year ago, falling from -$17.80 million to -$23.61 million.
  • MIDSTATES PETROLEUM CO INC's earnings per share declined by 48.1% in the most recent quarter compared to the same quarter a year ago. This year, the market expects an improvement in earnings ($0.01 versus -$2.53).
  • Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, MIDSTATES PETROLEUM CO INC's return on equity significantly trails that of both the industry average and the S&P 500.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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